By William Branigin
Washington Post Staff Writer
Monday, September 15, 2008 3:43 PM
President Bush today lamented what he described as "painful" adjustments in U.S. financial markets following the collapse of the Lehman Brothers investment firm, but he gave no indication of any further federal bailouts and said the markets are resilient enough to handle the disruptions.
In brief remarks at an appearance in the White House Rose Garden with the visiting president of Ghana, Bush said his administration is "working to reduce disruptions and minimize the impact of these financial market developments on the broader economy." He expressed appreciation for the work of the Treasury Department, the Federal Reserve, the Securities and Exchange Commission and major financial institutions in promoting stability.
"As policy-makers, we're focused on the health of the financial system as a whole," Bush said. "In the short run, adjustments in the financial markets can be painful, both for the people concerned about their investments and for the employees of the affected firms. In the long run, I'm confident that our capital markets are flexible and resilient and can deal with these adjustments."
Bush took no questions after the appearance with Ghanaian President John Kufuor.
But his remarks indicated that no federal help would be forthcoming for Lehman Brothers Holdings Inc. and other teetering Wall Street firms. Lehman Brothers, a 158-year-old global financial services firm, filed for bankruptcy today, and the troubled 94-year-old Merrill Lynch & Co. investment banking house agreed to sell itself to Bank of America Corp. for about $50 billion. There was also concern about American International Group (AIG), a major insurance corporation that has been beset by losses and is struggling to raise fresh capital.
Wall Street's struggles amid the deepening credit crisis sparked a sell-off on U.S. stock exchanges and provided fodder for the presidential campaigns of Sen. Barack Obama (D-Ill.) and Sen. John McCain (R-Ariz.). Neither offered any specific prescriptions for the ills of Lehman Brothers and other ailing firms.
The financial turmoil represents "a major threat to our economy" and "more evidence that too many folks in Washington and on Wall Street weren't minding the store," Obama said in a statement.
"Eight years of policies that have shredded consumer protections, loosened oversight and regulation, and encouraged outsized bonuses to CEOs while ignoring middle-class Americans have brought us to the most serious financial crisis since the Great Depression," he said.
Although he does not blame McCain for these problems, Obama said, "I do fault the economic philosophy he subscribes to." He said this philosophy is aimed at benefiting society's wealthiest people and hoping "that prosperity trickles down to everyone else."
Now, he said, "instead of prosperity trickling down, the pain has trickled up -- from the struggles of hardworking Americans on Main Street to the largest firms of Wall Street." He said he favors "modernizing" the rules governing U.S. markets to protect investors and consumers.
McCain said in a statement that the decline of the U.S. housing market, followed by the failures of Bear Stearns, Fannie Mae, Freddie Mac and now Lehman Brothers, has "taken an enormous toll on our economy." But he said he was "glad to see that the Federal Reserve and the Treasury Department have said 'no' to using taxpayer money to bail out Lehman Brothers."
The Republican presidential nominee called for "major reform" in Washington and on Wall Street, adding that a McCain administration would "replace the outdated and ineffective patchwork quilt of regulatory oversight in Washington and bring transparency and accountability to Wall Street." He also vowed to "rebuild confidence in our markets and restore our leadership in the financial world."
In a campaign appearance in Jacksonville, Fla., McCain said, "The fundamentals of our economy are strong, but these are very, very difficult times." He told supporters, "I promise you we will never put America in this position again. We will clean up Wall Street."
McCain later told a rally in Orlando, "The American economy is in a crisis today." He reiterated his faith in the strength of the economy's "fundamentals," which he identified as the American worker, innovation, entrepreneurship and small business. But he added, "Those fundamentals are being threatened today" because of "greed and corruption" on Wall Street.
"We're going to reform the way Wall Street does business and put an end to the greed that has driven our markets into chaos," he said. "We'll stop multimillion-dollar payouts to CEOs that have broken the public trust. And we'll put an end . . . to running Wall Street like a casino."
Campaigning separately in Colorado, McCain's running mate, Alaska Gov. Sarah Palin, echoed his remarks rejecting bailouts and called for a "complete overhaul" of the nation's financial system, also without giving specifics.
"Washington has been asleep at the switch, and ineffective," she said. "John McCain and I are going to put an end to the mismanagement and abuses in Washington and on Wall Street. . . . This is going to be one of the highest priorities of our administration."
She blamed not only federal policymakers but the heads of private financial houses, who she said put their own interests ahead of their employees' and shareholders' interests.
Senate Majority Leader Harry M. Reid (D-Nev.) described the shakeup on Wall Street as "the legacy of the Bush-McCain economic policies that have failed this nation." He said in a statement: "Failing to police lenders and neglecting to protect consumers ushered in the subprime crisis that has brought the American economy and Wall Street to their knees. This 'anything goes' approach to governing has resulted in lost jobs and carries an enormous price tag for the American taxpayer."
Rep. Rahm Emanuel (D-Ill.), chairman of the House Democratic Caucus, took aim at McCain's remarks on the economy.
"John McCain keeps proving just how out of touch he really is," Emanuel said. "Last week, he said he was 'divorced from the day-to-day challenges people have.' Today, he said 'the fundamentals of our economy are strong.' All the while, unemployment is up, costs are rising, incomes are declining, and [former Fed chairman] Alan Greenspan says we're in a once-in-a-century financial crisis. Only George Bush and John McCain can say the economy is strong and keep a straight face."